Well, that’s a wrap on another crazy year in the Melbourne real estate market!
With the last auctions held on Saturday 17th December, agents have stuck on their final sold stickers for 2022. Those who missed out will likely need to wait until next year (although we are seeing a rise in off-market and pre-market opportunities from some vendors trying to sell over the break.) So what lessons have we learned from 2022? Here’s a look back on the year we’ve had.
So what lessons have we learned from 2022? Here’s a look back on the year we’ve had. (Or skip to the bottom for our very quick summary!)
How did Covid impact the Melbourne property market in 2022?
Despite the media sensationalism, the market more-or-less normalised over the last 12 months, with prices cooling from the white-hot highs of Covid buyer FOMO in 2021. Buyers became much more price-sensitive, though we still saw strong competition for quality properties that were marketed and priced correctly. Vendors of compromised properties hoping to cash in on the price-highs of 2021 were disappointed though—watching their properties either get passed in or sold with a price reduction.
Compromised properties are now being left behind as buyers become more selective and are no longer willing to overlook the problems they did last year. (This is why asset class is so important in your purchase!) This includes unrenovated properties that were popular pre-Covid. These properties are now being left on the shelf, as buyers are scared of not being able to source supplies or trades and have no idea what it will actually cost them to remodel their new home.
Melbourne house prices have been declining slowly through 2022
We have seen the median prices going down slowly each month, across all suburbs. There has also been a significant lack of A-grade properties being presented to the market, likely due to lower confidence among vendors as the Covid FOMO buyers start to cool off.
Auction clearance rates have been pretty consistent—sitting in the high 60% region. Though this statistic is actually usually a bit higher than the true figure, due to agents not always reporting low clearance or withdrawing a property if they don’t think it will sell.
We are officially in a “buyers market” in Melbourne—generally declared once clearance rates drop into the 60% zone.
Melbourne property market predictions 2023—so what’s next?
Listings will slowly trickle in during January, alongside those off-market and pre-market opportunities from vendors who missed out in 2022.
But the market won’t really open up until after Australia Day weekend, when kids are back at school and everyone has snapped out of holiday mode. Mark your calendars for the real start of the auction season, which will kick off with first opens on the 4th of February for auctions on the 25th of February.
How will rising interest rates affect the property market in Melbourne in 2023?
Since the Reserve bank won’t meet in January, we’ll get a reprieve from interest rate hikes for now. That said, we’re expecting a further interest rate rise in February, so buckle up. Some are speculating that this will be the last for a while, but inflation will be the deciding factor there!
Historically, we see the effect of the interest rate rise about 12-18 months after rates start going up. Since we’ve had consecutive rate rises since May 2022, you can bet on mid-2023 (Q2) to really start to see a big impact on the market.
2023 should start out fairly strong, but the second quarter is where we are expecting to really see the effects of the interest rate rises. That’s when many borrowers will be coming off their fixed rate loans of around 2%, and jumping to a new rate that might be double or even triple that. Ouch! Some might struggle to make their repayments or may no longer qualify for finance on their home due to serviceability capacity.
That said, we’re already starting to see it affecting some sales, with buyers experiencing reduced capacity to borrow. Others might not be affected yet, but have been spooked by the dramatised media reports of a property market nose-dive (don’t believe everything you read or see on TV).
Our feeling is that the market will start out quite well in the first weeks of 2023, bolstered by low property stock levels and some pent-up post-holiday demand.
It’s unlikely that we will see any real up-tick any time in the immediate future, but we predict the market will remain plateaued for now (barring any major oversupply or large mortgage stress issues!)
If you are planning on selling in 2023, our advice is to be organised and go early before rate rises hit too hard. Contact us to get started on your plan now.
If you are looking to buy, there are a lot of factors at play, and we can help you to work out your timing according to your exact needs, area, and budget.
There are a few scenarios that could play out next year, but hopefully this gives you some insight into what you might be able to expect.
One thing that’s remained constant through all these wild changes is the excellent results we have been proud to achieve for our wonderful clients. We pride ourselves on always keeping on top of everything going on in a rapidly-changing market, so you can rest assured that if you’re working with us, you will always get the best advice and information.
We hope you have a beautiful and relaxed holiday season with your loved ones.
As always, if you need any advice or assistance on anything property-related, we are here to help.
Call our founder Carly on 0418 575 906 for a no-obligation chat any time.
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